There’s been a great deal of discussion and concern recently about proposed changes to taxes on super funds, and whether it signals an intent by the government to make changes to other tax benefits on accumulated wealth such as winding back negative gearing or introducing inheritance taxes.
One legal structure that’s not facing an erosion of tax benefits is that used for charitable trusts and foundations. In fact, the government has recently pledged support for philanthropy and joined Philanthropy Australia in its goal to double structured giving by 2030.
Charitable giving is an essential aspect of society. It allows individuals to contribute to causes they’re passionate about and make a positive impact on the community. Philanthropy has contributed to extraordinary advances in society including, medical research, treatment and cures, education reforms, the introduction of the National Disability Insurance Scheme, child protection laws and the advancement of human rights, just to name just a few.
Charitable giving can also be a complicated process, with a range of tax implications that can affect the amount of money that ultimately reaches the intended recipients. And that’s a key reason why we started our foundation! One way to simplify the process of charitable giving and maximise the tax benefits is to set up a charitable fund account with a Public Ancillary Foundation, such as the BeBlueRock Foundation.
Setting up a Charitable Fund Account (sub-fund) with the BeBlueRock Foundation provides a range of tax benefits to make your charitable giving more efficient and effective. Here’s some of the key tax benefits to consider in the lead up to EOFY.
A primary tax benefit of setting up a sub-fund with the BeBlueRock Foundation is that donations made to the sub-fund are tax-deductible for you, the donor. That’s right! With all your contributions tax deductible, you can reduce your taxable income and lower your overall tax liability. As we approach EOFY, you can set up a sub-fund prior to 30 June, make a tax deductible contribution, and have 12 months to work with us on defining your giving strategy before making donations to charities.It’s important to note that, while a tax deduction for a donated gift can reduce your taxable income to nil, you cannot create a tax loss or add to a tax loss. Therefore, to avoid losing the excess deductions that cannot be claimed in that income year, you can elect to spread the tax deduction across subsequent years (up to 5).
The income generated by your sub-fund is also exempt from income and capital gains tax. This means that any interest, dividends, or other income earned by the sub-fund, after distributions to charities, can be reinvested in the sub-fund without incurring any additional tax liabilities. This can help to grow the sub-fund’s asset base even without new donations, maximise the amount of money available for charitable giving and increase the impact of your sub-fund over time.
When your sub-fund makes distributions to eligible charities, those distributions are not taxed in the hands of the charity. This means that effectively donations into sub-funds enjoy three levels of tax benefit, one to the donor, one on income generated within the sub-fund and tax free gifts to the end recipient, the charities.
Setting up a sub-fund with the BeBlueRock Foundation provides a consolidated administrative structure for charitable giving. Rather than managing multiple donations to different charities, individuals can make contributions to the sub-fund as they choose and the Trustee, BlueRock is responsible for managing the funds, reporting and making grants to eligible charities. This can simplify the management of charitable giving and reduce costs.
A sub-fund can provide flexibility in managing charitable giving over the long term, which may be beneficial for estate planning. For example, individuals can establish a sub-fund as part of their estate plan and make regular contributions to the sub-fund over time. This can help to ensure that their charitable giving continues after they pass away and can provide tax benefits.
Once tax deductible donations have been made into your sub-fund, the sub-fund’s capital is not considered as part of your estate and is safe from claims made against your will. Setting up a sub-fund with the BeBlueRock Foundation is a simple and tax effective way to structure your philanthropy and create your own legacy of philanthropic giving.
1. Make a tax-deductible donation now to seed your sub-fund and decide each year which charities you wish to support with the income.
2. Support the charities of your choice by funding individual projects, or provide them with an enduring revenue stream.
3. Embark on your philanthropic journey secure in the knowledge that all the administration, compliance and governance is taken care of by BlueRock.
4. Build relationships and partnerships within the philanthropy sector that will inform and optimise your giving.
5. Build a philanthropic legacy in which you can involve your family, friends or business.
The Be BlueRock Foundation is a Public Ancillary Foundation, which is a type of charitable trust that is established for the purpose of making grants to eligible charities. The Be BlueRock Foundation is registered with the Australian Charities and Not-for-profits Commission (ACNC) and is regulated by the Australian Taxation Office (ATO).
The primary advantage of setting up a sub-fund in a Public Ancillary Foundation is that it provides a consolidated administrative structure for charitable giving, reducing costs and administration for donors. Rather than having to manage multiple donations to different charities each year and search for receipts as tax return time approaches, clients can instead make contributions to their sub-fund as they choose. They then have a full year to decide on which charities will receive distributions.
The Be BlueRock Foundation is responsible for managing the funds, reporting, distributing grants to the charities and causes of your choice, issuing receipts and monitoring outcomes and progress. Get in touch with our Foundation team to start your philanthropic adventure.